232 tariffs put Nafta talks under threat

OTTAWA — The prospects of a successful conclusion to the ongoing North American Free Trade Agreement (Nafta) talks have taken a heavy blow from US President Donald Trump’s decision on Thursday May 31 to impose duties of 25% on steel products and 10% on aluminium products from Canada and Mexico.

So say experts monitoring the talks.

“I think a successful Nafta agreement is now a long shot. The fact that this action is also against the European Union means [Trump] has opened up all these fights in all directions, with a relatively weak argument,” said University of British Columbia professor Kurt Huebner, speaking from Vancouver.

Indeed, Trump’s justification of the US duties on national security grounds has created barely concealed anger in the Canadian government, with Prime Minister Justin Trudeau saying during a national press conference on Thursday that he rejected the justification as spurious: “Let me be clear - for the past 150 years, Canada has been the United States’ most steadfast ally.”

Trudeau gave details of the breakdown in talks on Nafta that he claimed had been making progress.

He said last week, he had called the White House to offer to fly to Washington with foreign affairs minister Chrystia Freeland to seal a deal. But on Tuesday, he received a call from US Vice President Mike Pence saying that Trump would only talk if the Canadian government agreed that any new Nafta deal should have a five-year sunset clause.

“There was no possibility of a Canadian prime minister accepting this,” said Trudeau, and the Washington meeting plan was scrapped.

With Canada and Mexico now announcing retaliatory tariffs that include US steel and aluminium as well as some other politically sensitive products such as Bourbon whisky, Peter Warrian, senior research Fellow at the Munk School of Global Affairs, University of Toronto, and a senior expert on the steel trade, warned Metal Bulletin: “Given the points of escalation, Canada's retaliation list, Mexico's list, I think Nafta actually becomes more difficult.”

Huebner agreed that the new row would “slow negotiations and make it much more difficult.” And with a deal now impossible before the July 1 Mexican presidential elections, the likely victory of left-wing populist candidate Andrés Manuel López Obrador will complicate Nafta negotiations even further, given he is also opposed to free trade, Huebner said.

Meanwhile, Huebner questioned whether the White House was being driven by rational economic considerations, instead looking at the political impact of how the duties could fire up the president’s electoral base in the upcoming November US mid-term elections - political supporters who would not be enthused by a Nafta deal.

Krzysztof at Pelc, associate professor at McGill University in Montréal, predicted that wiser heads would prevail and the duties would be dropped, clearing the way for further Nafta talks.

“My bet is still that, given the competitive mid-term elections, the political costs of the tariffs and subsequent retaliation will be too high for the Trump administration. They will either pull out at the last minute or take some symbolic concessions a few days later, and backtrack then,” Pelc said.

“There's no way to tell whether this is another attempt at improving the US' bargaining position in Nafta or whether the intent is truly protectionist,” he added.